SYDNEY, May 31 (Reuters) - Amazon.com Inc said on Thursday it will force Australians to use its Australian website instead of its much larger U.S. site to avoid a new sales tax, setting the stage for a showdown with rival eBay Inc in the No. 12 economy.

The retail giant said it would subject Australians to the process known as "geoblocking" from July 1, when a 10 percent Goods and Services Tax (GST) applies to imported online goods worth less than A$1,000 ($756).

"While we regret any inconvenience this may cause customers, we have had to assess the workability of the legislation as a global business with multiple international sites," an Amazon spokesman said, adding that the firm was taking the measure to comply with the legislation and not to avoid paying tax.

The move will likely drive traffic to Amazon's Australian website, testing the patience of shoppers who have complained about its thin product range - a tenth the range of its U.S. site - and uncompetitive prices since it began taking orders in December.

It may also benefit Amazon's main rivals, from California-headquartered online market eBay to smaller Australian merchants which had campaigned to have the GST apply to all goods shipped from overseas.

National Retail Association CEO Dominique Lamb said Amazon's move was a surprise.

"You have to wonder if they are trying to funnel more traffic to its Australan website," she said.

An eBay spokesman said the U.S. company was working on a way to collect the Australian tax from sellers around the world without cutting access for Australians.

"eBay's GST solution ... allows imports to Australia to continue without any structural barriers, redirects or blocks to the buyer experience," he said.

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Until now, GST has applied only to most goods sold in Australia and imported goods worth over A$1,000, making relatively low-cost imported items cheaper than their equivalents in local stores.

Australian Treasurer Scott Morrison announced the change in April 2017, eight months before Amazon opened its Australian unit.

"The second-biggest company in the world, run by the richest man in the world, shouldn't get a leave pass from paying tax in Australia," Morrison said in an email statement on Thursday.

"If multinationals aren't forced to pay their fair share of tax, they will have a competitive advantage over retailers here in Australia, on our own main streets and in our shopping centres."